Brown, Outagamie County leaders say state must close 'dark stores' loophole

Owners of about 200 big-box stores in Wisconsin have challenged local property tax assessments using "dark store theory," which claims the tax value of active stores should be the same as comparably sized stores that are closed.
Doug Schneider | USA TODAY NETWORK-Wisconsin

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Menards went to court seeking to reduce the assessment -- and therefore the tax bill -- for its store at 2300 Woodman Drive in Howard by more than half. When the village said it would fight the case in court, Menards' lawyer withdrew the claim.(Photo: USA TODAY NETWORK-Wisconsin)Buy Photo

GREEN BAY - Some Brown County leaders hope their constituents can do what they themselves have not: Convince state lawmakers to change a law they say places an unfair tax burden on homeowners and small businesses.

As a result, local ballots in the November elections could include a question asking voters if the state should close the so-called "Dark Stores Loophole," which enables retailers to have their businesses assessed as if they were empty buildings rather than active stores.

That loophole unfairly shifts the tax burden from "big box" retailers and national drug-store chains to homeowners and mom-and-pop stores, county officials say.

A proposal that could go before the county board this spring would add a question to November ballots across Brown. It would ask voters if the state should change the law to eliminate the loophole, as Michigan's legislature did in 2017.

Legislation proposed in Madison this past session called for the Legislature to end the businesses' ability, because of law adopted in 2008, to use empty buildings as "comparables" in pursuing a reduced assessment (and thus a smaller tax bill). It had the support of the League of Wisconsin Municipalities, and communities that had faced such challenges or have had to repay taxes collected from retailers.

A bill sponsored by Sen. Roger Roth, R-Appleton, was not allowed to come to a vote. And the Assembly rejected a dark-stores bill.

"The state doesn't listen. The Senate sat on their hands," said Brown County Board Chairman Patrick Moynihan Jr. "Maybe if they won't listen to us, they'll listen to the citizens."

Retailers say the existing law helps them keep prices low and stay competitive in the marketplace. The state Chamber of Commerce and the Wisconsin Manufacturers' association say a change would discourage businesses from locating in the state.

A vote on a resolution would cost Brown County taxpayers about $2,000 in fees to publish notices of the referendum, a legal requirement, said Clerk Sandy Juno, who oversees elections.

Moynihan said that would be a small price to pay compared with the potential reduction of millions of dollars in taxable property value. But Hobart Supervisor David Landwehr questioned the value of a referendum that wouldn't require the state to do anything.

"Should we really be so worried about what the state should be doing," Landwehr asked, "Or should we be spending more time on things we can directly affect?"

Committee members voted 6-0 this month to recommend that the full board put the question on the ballot.

"If one of these retailers succeeds, we'll have the rest of them lining up to file suits," said Wrightstown Supervisor John Van Dyck.

The full county board would have to approve the measure. That vote would likely take place in mid-May, Corporation Counsel David Hemery said.

Statewide, at least 130 dark-stores cases have been filed since 2014; about half are still pending. Communities that have lost such cases have had to pay six-figure rebates.

Walgreens, which has filed 20 dark-stores cases in Wisconsin, won a $305,000 repayment from Oshkosh.

Janesville has had to refund $700,000 in tax money since 2014 to settle cases.

In Michigan, Menards saved big money on taxes. The city of Port Huron paid a $300,000 rebate to Menards before the law changed. The city also incurred $33,000 in legal costs to defend the case.

Mount Pleasant, in Racine County, lost two cases to Menards. Property values dropped by $2 million.

A case Menards filed against the village of Howard would have cost the Howard-Suamico School District $55,000 — the cost of an entry-level teacher per year. Menards dropped the suit after the village refused to settle the case.

Outagamie County supervisors last month voted unanimously to hold a referendum similar to that being proposed in Brown County. Board Chairman Jeff Nooyen said he would recommend to leaders in Dane, Waukesha, Marathon, LaCrosse and other counties that they also place the question on their ballots.

A USA TODAY NETWORK-Wisconsin review of dark-stores lawsuits in February found Menards led the state with 43 such cases. Walgreens was next with 20; Walmart had filed 12.

Referendum question

Here's the question that Brown County leaders want to ask voters in an advisory referendum in November.

"Should the state legislature enact proposed legislation that closes the Dark Store loopholes, which currently allow commercial retail properties to significantly reduce the assessed valuation and property tax of such properties, resulting in a substantial shift in taxes levied against other tax paying entities, such as residential home owners, and/or cuts in essential services provided by an affected municipality?”